Moody’s upgrades Piraeus Financial Holdings’ subordinated debt rating

Investing.com -- Moody’s Ratings has upgraded Piraeus Financial Holdings S.A.’s (PFH) long-term subordinated debt rating to Ba1 from Ba2, the rating agency announced Thursday.

The upgrade also applies to PFH’s subordinated MTN program ratings, which moved to (P)Ba1 from (P)Ba2. Additionally, Piraeus Bank S.A.’s subordinated MTN program ratings were upgraded to (P)Ba1 from (P)Ba2.

Other ratings and assessments for both PFH and its operating subsidiary remain unchanged, with stable outlooks maintained for the holding company’s long-term issuer ratings and for Piraeus Bank’s senior unsecured debt and long-term deposit ratings.

Moody’s attributed the upgrade to lower expected losses for subordinated debt creditors in case of failure. The rating agency expects the group to maintain significant bail-in-able debt and sustain a buffer above its internal minimum requirement for own funds and eligible liabilities (MREL).

The group has already exceeded its MREL target of 27.5% (due by the end of June 2025), reaching 30.4% in June 2025. This provides a substantial loss-absorbing cushion for senior and subordinated creditors.

Moody’s forward-looking Advanced Loss Given Failure analysis indicates reduced loss severity for Tier 2 creditors if the bank fails, reflecting the loss absorption provided by more junior instruments. This positions the subordinated rating at the same level as Piraeus Bank’s Adjusted Baseline Credit Assessment of ba1, up from one notch lower previously.

The rating agency noted that PFH plans to complete a reverse merger with Piraeus Bank before the end of 2025, creating a unified legal entity that will assume all outstanding junior liabilities. Moody’s expects this merger is unlikely to impact ratings.

The stable outlook balances expectations of continued improvement in the group’s credit profile against modest pressure on capital metrics from its announced Ethniki Insurance acquisition. While this acquisition is expected to increase non-interest income and improve earnings over the medium term, capital metrics will decline, and the resolution of government-guaranteed delinquent loans and real-estate owned assets will continue to affect Moody’s capital assessment.

Potential rating upgrades could occur with improvements in tangible capital metrics and asset quality, successful integration of Ethniki Insurance, and maintenance of solid profitability. Conversely, ratings could face downward pressure from sharp increases in non-performing exposures, failure to meet capital projections, deterioration in the operating environment, or reduction in loss-absorbing liabilities.

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